FX market update covering GBP, EUR and USD movements, PMI data, dollar strength, interest rates, oil prices and what today's market moves mean for international payments.
Key Highlight
- Flash PMIs take centre stage today, with figures from France, Germany, the eurozone, the UK and the US. These are the first major growth indicators since the Federal Reserve, Bank of England and European Central Bank all made policy decisions last week.
- The US dollar has strengthened broadly, with the dollar gaining against every G10 currency overnight. Comments from Fed's Barkin that inflation pressures may take longer to ease have provided renewed support for the dollar.
- Sterling and the euro remain under pressure against the dollar. GBP/USD is at its lowest level since late July, while EUR/USD has moved close to its July low. One week options also show the most negative positioning towards the euro since early September.
Market Recap
Sterling has declined against the dollar in six of the past seven trading sessions and is now around 3.65% below its 52-week high. However, GBP remains broadly unchanged against the euro, suggesting the recent weakness is primarily a result of renewed dollar strength rather than a significant deterioration in sterling.
Oil prices have also eased, with Brent moving towards $98 following reports that Saudi Arabia is restarting its East West pipeline and amid more positive signals from US Iran discussions. This has helped reduce some immediate inflation concerns.
In New Zealand, the RBNZ Governor warned that inflation could exceed forecasts if oil prices remain elevated. Markets are now pricing around a 75% probability of an October rate hike, helping the New Zealand dollar outperform as previous short positions were reduced.
Meanwhile, BoE Governor Bailey highlighted the challenge created by persistently high energy prices. This has contributed to some market participants questioning whether current expectations for further UK rate increases have moved too far.
ECB policymaker Nagel indicated that rates may need to move into "mildly restrictive" territory if energy prices remain high, providing some support for the euro despite its recent weakness against the dollar.
Market Overview
Today's PMI releases could provide an important test for the current direction of the major currency pairs. Markets generally expect growth to soften slightly, meaning the size of any surprise could be more important than the headline figure itself.
The timing of the releases will also matter. European data will influence the euro first, followed by UK figures which could affect GBP/EUR, before the US release provides the final major test for the dollar.
Both sterling and the euro are technically stretched against the dollar, but recent dollar strength has been driven increasingly by expectations around US interest rates rather than oil prices. With Brent falling towards $98 while the dollar continues to strengthen, the relationship between oil and the dollar appears to be becoming less influential.
EUR/USD
The euro remains vulnerable in the short term, trading below its key moving averages with momentum approaching oversold levels. The July low is now within reach, making the German PMI particularly important this morning.
A weaker than expected German reading could put further pressure on EUR/USD and increase the risk of a move below this support level. However, the stretched positioning also means a softer US data reading could trigger a relief bounce.
Over the medium term, the outlook remains cautious. The cluster of the 50 day and 100 day moving averages represents an important barrier. Expectations around further ECB tightening could provide some support for the euro if energy prices remain elevated.
For businesses: A move towards resistance could reduce the cost for those buying dollars with euros by approximately $300 per €250,000. A move towards support could increase the cost by around $460 per €250,000.
GBP/USD
Sterling is also trading below its main moving averages, with momentum close to oversold territory. Options markets remain positioned towards further sterling weakness over both one week and one month.
The next major support area is around the previous yearly swing low. A break below this level could expose sterling to further losses, although its oversold position leaves room for a short term recovery if US data disappoints.
The medium term picture remains cautious. The key moving average cluster above the current market is likely to act as resistance, while differences between US and UK interest rate expectations remain an important influence on the pair.
For businesses: A move towards resistance could reduce the cost for dollar buyers by approximately £550 per £250,000. A move towards support could increase the cost by around £900 per £250,000.
GBP/EUR
GBP/EUR is currently trading within a broader range, positioned between the 50 day and 100 day moving averages. Momentum is more neutral here than against the dollar, with both sides of the recent range potentially being tested.
The key catalyst today will be the difference between the UK and eurozone PMI figures. A stronger UK reading relative to Europe could support sterling, while stronger eurozone data could put pressure on GBP/EUR.
Looking further ahead, the outlook has become more cautious. Expectations of potentially more aggressive ECB policy, combined with the UK's greater exposure to elevated energy prices, could create additional pressure on sterling against the euro.
For businesses: A move towards resistance could reduce the cost for euro buyers by approximately £325 per €250,000. A move towards support could increase the cost by around £400 per €250,000.
What This Means for Businesses
Today's data is likely to create several points of potential volatility rather than one single market event.
European PMI figures between 08:15 and 09:00 will be important for the euro, followed by the UK release at 09:30, which could influence GBP/EUR. The US figures at 14:45 then provide the final major test for the dollar.
For businesses with upcoming international payments, the key consideration is that relatively small movements in GBP/USD, EUR/USD and GBP/EUR can have a meaningful impact on larger transfers. A £900 movement per £250,000 on GBP/USD, for example, illustrates why monitoring the market and considering timing can be important when planning currency requirements.
23rd September 2026
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